Reaganomics

“The world doesn’t suffer from an unequal distribution of wealth. It suffers from an unequal distribution of capitalism.” Rush Limbaugh

In 1776 Scottish economist Adam Smith published The Wealth of Nations, a ground-breaking book about the benefits of free markets. By coincidence, the United States was born on July 4 of that same year. The Founders of this nation were not economists, and they didn’t set out to build a nation on free market principles, but in their obsession with protecting the freedoms and political rights of individuals they built a free market society almost by accident.

Over the next couple hundred years the free enterprise system Smith advocated would vastly improve the quality of life for people all over the world, and American entrepreneurs would be responsible for most of the improvements.

Mainstream history books don’t say this, but life today would be almost as harsh as it was in 1776 if the United States, that one single nation, had not come into existence.

During the 1980’s Congress, under pressure from President Reagan, passed a series of tax rate cuts. Tendentious professors of history typically refer to the Reagan era tax acts as “tax cuts,” rather than “tax rate cuts,” implying that they caused a loss of government revenue. The half of history that you won’t learn in college is that the rate cuts of this era did not reduce government revenues at all. A spreadsheet of revenues and spending is available from the Congressional Budget Office, and the objective truth is that government revenues went up, not down, during Reagan’s presidency.

A typical university textbook describes the rate cuts this way: “By 1986 a series of tax cuts had benefited the wealthy by reducing top personal income tax rates to 28 percent and lowering capital gains, inheritance, and gift taxes. To compensate for the lost revenue, Reagan proposed massive spending cuts.”